“The Rent Board contends the “sold separately” exception does apply under our facts because plaintiff “admits that it has control of and owns the entire building at 840 55th Street, Oakland, California.” The Rent Board also notes the building’s four units are all connected within the structure, there are no units in the building that were not converted to condominiums, plaintiff negotiated to purchase all the units together, none of the units were sold to new occupants, and the complaining tenants continued to reside in their units just as they had prior to the conversion. Essentially, the Rent Board asserts plaintiff did not meet the “sold separately” requirement because it purchased the entire apartment building, regardless of how the transaction was structured. Plaintiff counters that the “sold separately” exception “applies rent control only to condominium subdividers [like Kolevzon], not to subsequent purchasers like Golden State.” Plaintiff is correct.”

In Golden State Ventures, LLC v. City of Oakland Rent Board, a landlord purchased four out of four of the condominium units in a single building in Oakland, and then increased the tenants’ rents by 125%. Apparently quite proud of this purchase, “In a blog posting discussing the acquisition of the building, plaintiff’s principal, Arlen Chou, stated: ‘The best part of the property is that as they are condominiums, they are EXEMPT from rent control! I will soon own a little island of rent control free property in a rising neighborhood in Oakland. Who said there are no deals in the Bay Area???’.”

However, while Costa-Hawkins decontrols “separately alienable” units (like single family homes) from rent control, a 2002 amendment “closed the loophole” where condominium subdividers obtained final map approval for sale, but then kept entire buildings – formerly apartments – as rent-control-exempt property, exalting form over function. As noted by the court in Golden State Ventures, LLC, “Such conduct was entirely legal at that time”, until the 2002 amendment required that the units be “sold separately to a bona fide purchaser” before decontrol applied.

“Rosemary Court’s allegations that Parsi moved out of the premises and lived elsewhere for a time do not constitute termination under the lease or any law that we are aware of and, therefore, do not support Rosemary Court’s legal conclusion that Parsi terminated her leasehold interest. Rosemary Court relied on Walker’s purportedly unauthorized assignment of the lease to Parsi for its unlawful detainer cause of action, but regardless of any such assignment, by Rosemary Court’s own allegations, including the terms of the lease incorporated into the complaint by reference, Parsi was a colessee of a month-to-month tenancy who had moved out of the premises for a time, which remained occupied by Walker, and then moved back into the premises around the time that Walker moved out. These allegations establish only that Parsi was a colessee of the premises with an ongoing right to a month-to-month tenancy. Therefore, Rosemary Court did not state an unlawful detainer cause of action against Parsi.”

Infamous landlord Anne Kihagi tested the limits of Ellis Act re-rental constraints, as illustrated in the latest appellate decision chronicling her exploits, City of West Hollywood v. Kihagi. While withdrawing an 8-unit, rent controlled property in West Hollywood from the rental market, Kihagi harassed one of the tenants, prompting the City of West Hollywood to prosecute, leading to a settlement agreement governing the application of the Ellis Act.

For purposes of the Ellis Act, the property featured several “classes” of rental units: four were unoccupied, four were occupied, and one of the occupied units claimed an extension of the withdrawal date (as tenants who are disabled or at least 62 are entitled to do). The Ellis Act uses a floating definition for the “date of withdrawal”, which could be as early as the landlord files the notice of intent or as late as the extended termination of tenancy. Further, while the Ellis Act imposes vacancy control constraints for five years and requires a “first right of refusal” for ten, these restrictions do not appear to apply to rental units that are unoccupied at the time of withdrawal. (For those, arguably only a two year re-rental restriction applies – or perhaps even no restrictions at all.)

Despite entering a settlement agreement with potentially more restrictive terms, Kihagi re-rented units after the five-year vacancy control restrictions would have expired under the Ellis Act. The Court of Appeal first noted that landlords’ agreements to waive rights under the Ellis Act are void, citing Embassy LLC v. City of Santa Monica (2010) 185 Cal.App.4th 771, 777, but ultimately determined that Kihagi had re-rented outside of the Ellis Act constraints.

“Looking at the history of the city’s legislation concerning landlord-tenant buyout agreements and the case law concerning these agreements, the conclusion is inescapable that these agreements have been utilized and honored for decades. The city has plainly taken this view of its rent ordinance.”

UPDATE: The First District has certifiedGeraghty v. Shalizi for publication.

In the landmark case, Kaufman v. Goldman (2011) 195 Cal. App. 4th 734, Division One of the First District Court of Appeal resolved that, even though the San Francisco Rent Ordinance purports to void any waiver of tenant rights under the Rent Ordinance, the settlement of a lawsuit will suffice to circumvent that rule. It reasoned that, “Parties frequently settle landlord-tenant disputes, and move-out provisions are not uncommon. If [the anti-waiver provision] were deemed to apply to such move-out provisions, this would have a chilling effect on future settlements of unlawful detainer actions as landlords would have little incentive to enter into pre-litigation negotiations”.

Geraghty v. Shalizi featured such an agreement, and once again, Division One was faced with the question of whether to enforce the protections of the Rent Ordinance against a landlord, in light of the anti-waiver provisions, or to give deference to an agreement for possession that was freely negotiated between the parties.

In an unpublished decision, the Second Appellate District explores the litigation privilege in the context of an unusual appellate reversal of an unlawful detainer judgment.

An unlawful detainer judgment has two parts – possession of the property and incidental monetary damages. Generally, the service of a termination notice, the filing of an unlawful detainer action an even the enforcement of the judgment and other post-judgment activities are all protected by the litigation privilege (Cal. Civ., §47) from being the subject of subsequent lawsuits. (You generally cannot sue someone for suing you.)

One basis for terminating a tenancy under California law is that the tenant is engaging in illegal activity. However, the illegal activity must have some connection to the use of the property. (For instance, a tenant probably cannot be evicted for embezzling or robbing a liquor store, but they could be evicted for selling illegal drugs or discharging a firearm from within an apartment.)

In Doll v. Ghaffari, the tenant was subletting her apartment at a profit, in violation of a Santa Monica rent ordinance provision concerning maximum allowable rent for subtenants. However, to terminate a tenancy for illegal use, the Santa Monica rent ordinance adds an additional requirement that a tenant must actually be criminally convicted of the violation before a landlord can bring an unlawful detainer action. (While it is generally understood that cities can monitor the bases for evictions, the court suggested that the “conviction requirement” may be an impermissible prerequisite to an unlawful detainer in violation of Birkenfeld v. City of Berkeley (1976) 17 Cal.3d 129.)

The landlord, Ghaffari, prosecuted an unlawful detainer based on illegal short-term rental use and won at the trial level. Ghaffari thereafter enforced the unlawful detainer judgment and recovered possession, eventually auctioning Doll’s personal property that was left behind. Doll appealed and the judgment was reversed, but she was not restored to possession under Cal. Code Civ. Proc., §908, upon a finding of unclean hands.

Doll then sued for, among other things, breach of contract, wrongful eviction/trespass and elder abuse for the selling of her property, prevailing on her claims for breach of contract, wrongful eviction, elder abuse, etc.

On appeal, the court found that the landlord’s activities in terminating the tenancy, recovering possession of the apartment and even in selling the property, post-judgment, were all covered by the litigation privilege, citing to Feldman v. 1100 Park Lane Associates (2008) 160 Cal.App.4th 1467, Action Apartment Assn. v. City of Santa Monica (2007) 41 Cal.4th 1232 and Rusheen v. Cohen (2006) 37 Cal.4th 1048. It therefore reversed the verdict as to the claims based on dispossession and the selling of her personal property.

Doll asserted that the case Chacon v. Litke (2010) 181 Cal.App.4th 1234 stood for the proposition that post-trial enforcement activities are not protected. However, the Court of Appeals noted that Chacon merely stood for the proposition that an unlawful detainer judgment did not forfeit a tenant’s right to reoccupy following a non-fault eviction, where a local rent ordinance reserved a right to reoccupancy.

However, in affirming her contract claims, the court relied on Munoz v. MacMillan (2011) 195 Cal.App.4th 648 to conclude that a tenant may sue on contract claims for a terminated lease agreement, where the unlawful detainer action that terminated the lease is later reversed on appeal. (It noted, however, that Munoz did not reference the litigation privilege or Action Apartments.)

Doll v. Ghaffari provides an interesting review of the duality of the unlawful detainer judgment – as consisting of a right to possession and for incidental money damages – and the duality of a leasehold estate – as consisting of a contractual right and an interest in land – while navigating the litigation privilege. Here, the tenant prevailed on the money damage issue in the underlying unlawful detainer action, while asserting her contract rights under the leasehold, but lost on the issue of her interest in land and being restored to possession. That said, this case is currently unpublished, and, as the court noted, Munoz did not address the litigation privilege (relying, instead, on a case from 1917). So California courts may come to a different conclusion the next time it reviews a similar series of lawsuits.

Residential Rent and Eviction Control Resources

Justin A. Goodman, Esq.415.956.8100

Costa-Hawkins.com is a product of Justin A. Goodman, esq. of Zacks, Freedman & Patterson, P.C., in San Francisco, California. This site is not intended to provide legal advice. It is not affiliated with any government agency.